Converge Q1 revenues up 40% to P8 B

Published May 16, 2022, 1:18 PM

by Emmie V. Abadilla

With the continued increase of its residential subscribers and enterprise clients, fiber broadband provider Converge Information and Communications Technology Solutions, Inc.’s revenues shot up 40 percent to P7.75 billion while net income grew 27.2 percent to P1.973 billion in the first quarter of 2022 versus the same period last year.

Dennis Anthony Uy, Converge

Residential revenues grew 42.0 percent year-on-year (YoY) as the company added 187,594 subscribers, bringing the count to more than 1.8 million, up 52.5 percent.

Converge’s fiber-to-the-home (FTTH) port roll-out of almost 645,000 in the first three months of 2022 resulted to 47.3 percent household coverage across the Philippines and 71.4 percent household coverage in Luzon.

The company is on track to reach its accelerated target of 55 percent of households nationwide by 2023.

However, average monthly revenue per user (ARPU) declined to P1,243 in 1Q2022 due to among others rebates awarded to subscribers who were not provided broadband in the areas affected by Typhoon Odette.

On the other hand, enterprise revenues grew by 25.1 percent YoY to P938.2 million during the same period, mostly from the strong growth in the small and medium enterprise (SME) segment.

During the first quarter, Converge had 187,594 quarterly gross adds, 14.9 percent higher than the 4Q2021 gross adds after waiving installation fees in some of its operating areas.

Gross adds grew despite the adverse impact of Typhoon Odette in certain cities in Visayas and Mindanao, where the company hated its expansion to repair affected equipment.

On the other hand, churn rates grew 1.47 percent, higher than the 1.16 percent in 1Q2021, resulting in quarterly net adds of 110,652.

Converge has been implementing various controls and measures to manage churn, including stricter onboarding requirements in selected areas with high churn blacklisting of previously delinquent subscribers, and implementing a payment reminder pop-up on browsers of subscribers with overdue bills.

Reflecting the high unserved demand for fixed broadband connectivity services in the Philippines, Converge reckoned that 95 percent of its new subscribers nationwide are first time fixed broadband users.

Revenues from the company’s enterprise business grew 25.1 percent

YoY.

Revenues from SME business grew 118.2 percent on the back of growing customer base.

Compared to 1Q2021, SME customers grew by almost 200 percent reaching 25,810 customers as of March 31, 2022.

Overall, Converge achieved an EBITDA of P4.558 billion, 49.4 percent higher from the previous year.

As a result, it was able to improve its record consolidated EBITDA margin to 58.8 percent.

Despite higher gross installs in 1Q2022 compared to the same period last year, network materials and supplies costs declined, reducing the account’s cost margin from 8 to 5 percent

This is due to lower unit costs of our network materials and supplies.

Bandwidth and leased line costs continue to decline year-on-year from P277 million in 1Q2022 to P258 million in 1Q2021 as the company relies more on capacities from its invested international cable lines rather than short-term leases. This resulted to cost margin reduction from 5 to 3 percent.

Depreciation and amortization margins grew from 14 to 16.8 percent from 1Q2021 to 1Q2022.

Finance costs also grew by 83.1 percent due to higher outstanding loans as of 1Q2022 – mainly used for infrastructure expansion.

Converge’s Return on Invested Capital (ROIC) declined due to slower net income increase compared to capital expansion and an increase in financial liabilities.

Converge recorded a 17.3 percent ROIC in 1Q2022 from 20.9 percent during FY2021.

Its high ROIC continues to be at industry-leading levels as a result of the company’s disciplined approach in deploying capital to expand its fiber network and tracking key capital efficiency indicators such as port utilization ratios.

Converge’s blended port utilization ratio as of March 31, 2022 was at 27.6 percent.

Of the 1Q2022 FTTH ports deployed, around 20.6 percent were rolled out in Visayas and Mindanao (VisMin).

Converge maintained its strong balance sheet and cash flows with ample liquidity and gearing comfortably within bank covenants, as it drew down from available facilities to finance its network expansion in the first quarter.

Its net debt position (as measured by total financial debt less cash and cash equivalents) increased from P11.762 billion as of December 31, 2021 to P16.299 billion as of March 31, 2022.

The company availed of a total of P4.963 billion in new debt in 1Q2022 offset by repayments and amortizations amounting to P486 million.

Converge’s total undrawn debt facilities amounted to P26.500 billion (~US$530 million) as of March 31, 2022.

Also, the company has issued its maiden long-term Philippine Peso bond offering which was listed in the local bond exchange on April 8, 2022.

These additional funds will increase its available liquidity.

Converge’s long-term Philippine Peso denominated bonds was fully oversubscribed (up to 8x base principal of P5 billion) last April 2022.

This P10 billion fully oversubscribed issuance was the first tranche of its shelf registration with the Securities & Exchange Commission (SEC) of up to an aggregate principal amount of ₱20 billion.

“We believe our long-term debt facilities with seven commercial banks, together with our available cash, bond issuance proceeds and increasing operating cash flows, provide us with sufficient headroom to execute our capital expenditure plans in the mid-term,” Converge disclosed.

 
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